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My Secret Loan From Mom & Dad (True Story)

by J. Money on Wednesday, September 14, 2011

Shh - secret
None of you know this yet, but I’ve been keeping a rather salacious secret from you when it comes to my financials ;)  I don’t know why I did it at first, other than seeing how long I can keep something hidden for, haha… (and here you thought I spilled *everything!*) but after a while I guess I just kinda got used to it and didn’t realize how much time had been passing. Only yesterday, I suddenly wake up and realize that, Holy $hit!, I’m about to be a free man!

And herein lies the secret ;)  I, J. Money – king of all things money and blogging – had snuck in a $18,000 (!!!) loan from the Bank of Mom & Dad!  And no one knew but the wife!  (oooooooohhh… ahhhhhhhh… crowd gets shocked!) Haha… It sounds pretty crazy w/out the details, but I assure you it was a calculated play based on whole bunch of variables (and potential) from the get go.

Let’s start from the beginning, shall we?

  • 18 months ago I get approached by a friend to invest in a project.
  • It’s an income-producing deal, but I needed a whopping $18,000 to own it outright (and really, that was the best way to play it.  As shady as that sounds (no it’s not illegal or anything, haha…)
  • I considered borrowing against my own money, but at the time I was in the process of saving up for my goal of blogging full-time, and it didn’t make sense for me to pull out all of the money I had in there (which was around $20k at that point) – even IF it would help me reach my goal a little faster (it did).  Looking back it was a good thing too considering I got laid off just a few months later ;)
  • So at that point, it was either borrow the money from somewhere else, or pass on the opportunity and continue trucking forward w/ my $50k savings goal. I chose borrowing from mom and dad instead.
  • After talking with my parents, and researching other personal loans out there (including a cash advance from my USAA credit card which would have only come out to about 6%! (they’re pretty good about that if you call and lock in a deal before using one of those c/c checks), I decided to take them up on their offer of 0% interest.
  • At first it felt pretty weird/wrong – esp since I HAD the money and I just didn’t wanna tap it yet – but like with all parents, they really wanted to help out their kid and were just as excited to loan me the money, as I was for the business venture and to prove myself ;)  I tried offering them at least 2-3% for their time and what not, but they wouldn’t have any of it and declared it was gonna be 0% or nothing.
  • So I took it :)  And then we wrote up an agreement, had everyone sign it, and decided that for the next 18 months straight I’d cut them a check for $1,000 until it was entirely paid off in full.

Which leads us to today!  The day I send in my very last check and become $1,000 richer each month! Woohoo! (I actually made the last check $1001 just to force them to take an extra dollar from me in the end! haha…) I figured I’d have to tell y’all some time since my future Net Worths were about to look a heck of a lot better! And I had no explanations on where the heck that extra money would be coming from ;) Kinda hard to hide $1,000 every month when you list out all your financials for everyone to see! Haha…

So that’s the news!  What do all think?  Would you have done the same in my shoes, or just gone ahead and dipped into your savings and/or passed up on the deal entirely?  I can’t divulge what, exactly, the project WAS that I took on a year and a half ago (I promised I’d keep it on the hush)  but I can tell you that it has, indeed, been generating well over the $1,000/mo I was paying for it each month… which was the #1 factor in making this decision to begin with: The fact that I could use this generated income to PAY OFF the entire loan this way.  Provided it continued on the right path the whole time, of course ;)  This woulda been a completely different post had things gone awry! Haha… And it may or may not have been hidden from y’all even longer in that case ;)

Any of you taking calculated risks these days?  Or bet yet – have some juicy secrets to tell ME?!
I wanna know!!

—————
(Photo by Zawezome)


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{ 35 comments… read them below or add one }

1 Money Beagle September 14, 2011 at 8:57 am

No fair, you need to tell us what it is first :)

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2 20's Finances September 14, 2011 at 8:59 am

It’s too bad you can’t tell us what it was. I would have a hard time getting that big of a loan from the parents. I’m not sure they would have that much money to loan me. haha. Sounds like a great decision on your part. Congrats!

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3 LLF September 14, 2011 at 9:05 am

Good one, J$. Now I am dying to know what the venture is that is generating that income. Can I join? =) Another question is, how are you so sure that your venture will come through? Know you, you probably would not invest unless you are more than 50% sure that it would succeed, but what were the risk/reward factors for you?

As my secret? In my networth updates, I don’t count in the money I loaned out or Mr. LLF’s investments. It’s just my investment and our joint assest and debts.

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4 Bryan Mayer September 14, 2011 at 9:26 am

Why didn’t you put this on your Net Worth reports? That’s very misleading to your readership

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5 Jennifer September 14, 2011 at 9:27 am

Now that makes me feel no so bad about the $20K loan I took out from my mom :) I am also paying it back to her $1K a month, and am more than halfway through. (I figure between my end of the year bonus at work, and our income tax return check, we should have her paid back by early next year.) She is also charging me 0% interest, but I know that when the whole thing is finally paid off, I will pay her back a little extra somehow. A nice dinner out for her and her bf maybe (although she and I both mystery shop, so most of our meals out are free anyway) or a massage and facial at a local spa. She never treats herself, so it would be a good opportunity for me to make sure she does :)

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6 J. Money September 14, 2011 at 9:54 am

@Money Beagle – Haha, I wish I could too! It’s *very* hard for me to keep secrets – esp money related. Maybe if you catch me at the conference I may slip? ;)
@20′s Finances – Yeah, there’s no way I’d accept it if it was all the money they had. They took it from some cash sitting in one of their funds not making much anyways :)
@Bryan Mayer – a) I couldn’t tell anyone because I promised I wouldn’t, b) I’m still as transparant as ever and c) it’s my blog ;)
@Jennifer – Oooh that is a GREAT idea! You know what, I’m gonna do that too. Cuz they won’t accept money from me, but they surely will some nice quality time w/ their son, haha… awesome idea. And no! Def. don’t feel bad. I’m not sure why it was you had to take it out, but it seems like you have a good gameplan set up in paying it back, and being halfway there you’re obviously prioritizing it. Good job :) Glad this makes ya feel better!

@LLF – Haha, if it was a “joining” one I’d def. let you in on it! But believe me, it’s also a lot of hard work :) Interesting to know you’re keeping out a loan from your updates too! haha… I wonder how many others are doing stuff like this? To answer your questions:

how are you so sure that your venture will come through?
- It already has. Every month as I was paying it off, I was bringing in more than the $1,000 :)

what were the risk/reward factors for you?
You’re right, if I wasn’t at least 50% sure I’d make money off of the deal, there’s no way I would have done it. In fact, usually it has to be around 75-80% for me to take something that big on. And this one had a track record of bringing in at *least* $1,000 a month, so I figured it was a safe bet.

Nothing is automatically *free* money though, I didn’t just put my money in and wait for money to come out – i had to (and still have to) work to maintain it and make sure all is working smoothly, etc.

But in the end, I figured that the worst case was I’d lose $1,000 every month for 18 straight (yikes!), and I’d learna crap ton, OR I can make $3,000-$4,000 a month if all went well. That didn’t happen as much as I would have liked, haha, but after it did once or twice I realized it was all gonna work out in the end :) And I still own the project. So from this point forward, it’s all profit. But again, I still have to work on it and put in time – it’s not passive.

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7 Dani @ OK, Dani September 14, 2011 at 10:06 am

Awww I thought you were telling us the whole story with your monthly updates. ::shaking fist at you!::

I took a loan from M&D Bank too, but for grad school. I could’ve paid out of pocket but that would derail my savings. I just plain didn’t want to. So instead I got a zero interest loan from the fine folks at M&D and pay them back 1000/month. Aint no thang.

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8 bobbi September 14, 2011 at 10:30 am

Yeah, I thought you were telling the whole story also… why even bother putting those numbers out there if they aren’t true. I really like your blog but kinda feel lied to. It may be your blog but the fact that you portrayed it as the truth when it wasn’t bites. Oh well… just a reminder that you never take what you read on the internet for truth. It will make me wonder about all the other stuff now.

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9 J. Money September 14, 2011 at 10:42 am

Sorry guys – 99% of my financial life is up there, but every now and then things happen that I can’t share due to one reason or the other. If I don’t protect myself, and others involved, then the blog may not even exist to begin with ;) I’m sure there are things you guys keep silent too – whether on your site, or in life in general, yes?

My mission to stay as transparent as possible is still my #1 priority, and minus random one-offs like this, it’s still extremely accurate.

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10 Henry September 14, 2011 at 10:45 am

You say that the venture generated over $1000 from the very start – was this a project your friend had already started (therefore giving you evidence of its viability)?

If so, can you share how long he had been working on it before you bought in? – to show us how sure of your return you were.

If not, and the fact you “own it outright” leads me to believe you got in at the start, how active are you in the business?

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11 Michelle September 14, 2011 at 10:46 am

Yeah I would have done the same thing most likely. $18K is a lot, and I don’t know what I would do if I had that big of a hole for awhile.

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12 J. Money September 14, 2011 at 10:59 am

@Henry – Yes :)

– My friend had a detailed report going back 2 years – it wasn’t something that just started making money.

– She probably worked on it for a good 3-4 years total (?), but only towards the end did she figure out a way to make it viable.

– Nope, I just took over when my friend wanted to move projects and start working on something else. I’m very active in the business now, especially since I own it outright. Sometimes I wonder if I’m spreading myself thing w/ everything I’ve got going on, but at the end of the day it allows me to maintain my currently entrepreneur lifestyle, so I love it. Perhaps one day down the road I’ll hand it off to one of my friends?

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13 Stephanie September 14, 2011 at 11:01 am

Congrats, J$! That is a big accomplishment. You should be very proud.

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14 Ginger September 14, 2011 at 11:04 am

I would take about $400 (about 2-3% interest for the loan) and do a major nice thing for your parents. Maybe a dinner cruise?

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15 crashdamage1957 September 14, 2011 at 11:13 am

Good parents who raised a good son. ” dirty little secret” loans such as this have been going on in families for ages, so while i understand your reticence in revealing something that might compromise anonymity ,Bryan does make a good point about including it in the net worth statement. But to answer the question that you put forth, yes, i would have done the same thing. In fact, I took a Mom Loan to help finance college, which i paid off faithfully in monthly installments when i began working full time, 3 months out of college, until it was paid off in full, 2 1/2 years later. And my mom faithfully put each and every one of those payments in the bank, years later giving it to me and my wife as a gift, along with the accrued interest, to help with a down payment on our house. None of which she had to do, but all of which i will always be very grateful for.

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16 Evan September 14, 2011 at 11:58 am

I used the bank of mom and dad to subsidize law school (only $70K of it was on me lol) – borrowed and already paid back about 10 or 15K from them already.

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17 retirebyforty September 14, 2011 at 1:14 pm

Wow, the secret project sounds very intriguing. I borrowed 30k from the M&D bank to help with the down payment of our first house. It’s been paid back since then. They also paid for my education and I’ll help support them when they are older.

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18 Ashley @ Money Talks September 14, 2011 at 1:22 pm

I’ve never used the bank of mom and dad. I don’t think they would loan me money anyways, unless I was dying or something.

I’m totally jealous of your new business, I can’t wait to find out what it is.

And on the “nondisclosure” thing… no big deal. I mean, you have the right to some privacy, if anyone is getting offended by this then they need to chill. It’s your life, your money, your site, your everything. No one can be 100% open to the world all the time. “Why didn’t you tell us?”.. you’re telling us now. That has to be good enough for everyone.

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19 Walnut September 14, 2011 at 1:24 pm

I have a juicy secret that I haven’t shared with anyone but the BF. I bought my house during one of the many stock market tanks. I had always invested in my Roth with the full intention of using the money to pay for college or buy a house (both qualified withdrawals). The balance of my Roth had tanked and I just couldn’t bear pulling out the remainder for my downpayment. Instead, my parents wrote me a check for $20k. Further, they wouldn’t let me pay it back to them. Instead, they insisted that they would help all of us siblings buy our first houses and I established the base rate of the check.

Thanks, Bank of M&D. You guys rock! (And seriously, I will pay you back in a heart beat should you ever want me to.)

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20 Jenna, Adaptu Community Manager September 14, 2011 at 2:05 pm

Thanks for being so honest. I took out a loan from Bank of Mom and Dad in college to go to Greece for two weeks. Definitely worth every penny. But it felt great finally paying them back.

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21 Matt September 14, 2011 at 2:19 pm

So when is the $1000 giveaway for the first poster to guess the secret project?!

Here’s what we have to work with:
1. Business cost $18k
2. Business Generates $1-3k a month
3. Business was formerly owned by a female
4. Business is 2 years old
5. I picture J$ humming the mission impossible theme while doing this job

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22 J. Money September 14, 2011 at 2:53 pm

@Stephanie – Thanks Stephanie!! And the real payoff comes now, after sticking to the the plan for 18 months… I gotta turn around and start applying the $1k to something GOOD now before I get used to having so much extra money!! The plan is coming soon ;)
@Ginger – I love it! Great great idea… I’m def. going to do something for them, y’all are smart.
@crashdamage1957 – Wowwww, your mom is so GOOD to you both! That is brilliant, love hearing stuff like that :) The parents/kid bond is strong!
@Evan – Nice work so far! “Only” – haha…
@retirebyforty – Same here :) The Bank of J. Mo will always have open doors for the parents!
@Ashley @ Money Talks – Awww, thanks ;) Yeah, I do my best to keep my books as open as possible around here, but at the end of the day I gotta make sure my life comes first… even though it seems like my blog really IS my life, haha… it did kinda catch me off guard though, wasn’t expecting any hate up in here. All in the name of the game though, eh? Really appreciate the support, it means a lot.
@Walnut – Wowwww, def. a juicy secret! Thank you so much for sharing it with us!
@Jenna, Adaptu Community Manager – Awesome! Big fan of life experiences :) Oddly enough we went out with the parents for almost 2 weeks in Greece too! Though no loaning was involved… beautiful place!
@Matt – HAH! You’ve actually got your #4 wrong though, sleuth ;) I said it was bringing IN money the last 2 years, and that was when the lady friend had it. Factor in time I’ve had it, plus time she worked on it *before* it started generating money, and you’ve got a much different number.

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23 Kandace September 14, 2011 at 6:20 pm

I don’t think it’s bad at all. You’re very fortunate to have parents that are in the position to loan you that kind of money. We hope to be able to help our children in the same way in the future.

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24 Jen @ Master the Art of Saving September 14, 2011 at 7:57 pm

Congrats on the success of your ‘secret project’ and paying off you M&D loan. If you only had about 20k in savings then it sounds like you made the right choice, I’d probably do the same. :-) As for keeping it a secret from all us, it doesn’t seem like a big deal. If people have such a big issue with it then maybe they shouldn’t read your wonderful blog anymore. Just my opinion. I do the same thing with the stuff on blog—everything’s out there for everybody to see. I haven’t kept things out or anything but I would hope everybody would still love me if I did.

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25 J. Money September 14, 2011 at 9:29 pm

@Kandace – Aww, thanks! I would like to do the same as well for my future kids :) Hopefully we both succeed!
@Jen @ Master the Art of Saving – Yeah, def. interesting to see what people get upset about, and what they don’t. Every day someone wants to unsubscribe for some reason, so I just do my best to keep being ME and keep blogging the way I originally intended to cuz that way I’m not veering off track. It’s hard sometimes, but it’s much harder trying to be (and act) like someone else :) You take the good and the bad w/ blogging!

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26 LG September 15, 2011 at 6:50 am

Is this when the mortgage payoff plan you’ve been saying will start soon starts?!

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27 M from the BX September 15, 2011 at 9:53 am

J. Money,

I understand exactly how you feel about borrowing money from your parents. I borrowed $20k from mine to buy my apartment because I didn’t want to go into my saving, The day I gave them the last check was amazing!

As a person who hates debt and refused to take out a single student loans for undergrad, I worked my summers off and applied to endless amounts of scholarships to make sure I was clear of any school debt when I graduated. (Grad school is a different story, I have to take out loans because I didn’t qualify for any financial aid :( .

Asking my parents for a loan was one of the hardest things for me. It did take me a year and a half to pay them back but was I relieved to no longer have that debt on my shoulders.

Keep up the good work with your blog, and F people who are upset. They aren’t worth your time.

Reading all the way form the Bronx,

M

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28 J. Money September 15, 2011 at 5:21 pm

@LG – YUP!!!! Which is part of the reason I decided to divulge all of this stuff right now ;)
@M from the BX – Yeah Bronx! That’s what I’m talkin’ about. Good for you on paying it back so FAST like that, $20k is no joke. And double love for taking on grad school. You’re reppin’ BX well ;)

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29 ca September 16, 2011 at 12:12 am

ok, I really had a whole lot of respect for you until this. You want me to ooooh and aaaah over you getting an interest free loan from your family?!? After your old boss played you, your friend had you on pins and needles for $5k+ and you extoll paying your parents $1!!! for more for an $18k loan cuz they think your sh&t don’t stink?!? C’mon dude really?!? Are you that shallow and cheap? Did you just enter yourself into your own love drop contest? You owe them more than $18k+$1 just for having you!!! They love you! They would have forgiven the loan if you couldn’t pay it and called it a day!! You owe them more than your appreciation, a token $1 and a sorry blog post – show your mom and pops the love!!! for realz!!!

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30 J. Money September 16, 2011 at 10:03 am

I take big offense to that Love Drop comment man – that’s below the belt. Say what you want about me, but to even hint that I’d take advantage of a project I’ve worked my ass off for to help OTHERS across this entire country, 30+ hours a week, is just terribly incriminating. If I’m not living up to your standards, I’m sure there are dozens of other blogs out there written by perfect little angels.

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31 Natalie @ Mango September 16, 2011 at 10:25 am

Along with everyone else commenting, I really want to know what this venture was now! You can’t just give us some of the details! Ah well, whatever it was, I’m glad it turned out so well for you. If I was in your position, I would have done the same thing. That’s what family is for, right? Oh and love and support and all that too. I’m sure it would feel a little bit…weird at first, borrowing from Mom and Dad; but once you pay it off– with an extra dollar to boot!– I’d imagine you’d feel even more responsible and independent than before. I bet your parents are proud!

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32 ca September 16, 2011 at 9:16 pm

Ya know what? You’re absolutely right. The love drop comment was outta line – I apologize. I didn’t need to throw that up in there, but the rest stands. $18k + $1 for a car loan? – Yes! Any OTHER loan? Hell yes!! Your family?!? Damn. Just saying. Peace.

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33 J. Money September 17, 2011 at 10:15 am

@Natalie @ Mango – Thanks Natalie :) Yes, they are proud for both going out on a limb and taking on another business, but then also for paying them back in full – which the old me might not have done back in the day. One of the other reasons I kinda wanted to take a loan from them was to prove that I can now do it, and I’m “all grown up” :) So the day I sent that last check in was a very very good day for me. And I love them for giving me that chance!
@ca – No worries, it’s all good :) And sure, I can understand from the looks of this post that it can come off as being ungrateful and selfish. There’s actually a lot more to the story that was left out (on purpose), including much more than a simple “thank you” and a dollar. The dollar was meant as a joke, not a slap in the face, and they thought it was just as funny as I did. But to your overall point, yes – I think it’s always important to show appreciation for your loved ones. It’s a good reminder to always keep that in mind.

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34 K September 22, 2011 at 3:04 pm

I think it was wrong for you to take advantage of your parents generosity and robbing them of money they should be investing for their retirement, especially when you had other resources available.

Even though the venture is making money now, perhaps it won’t in the future – there is no such thing as a “sure thing” anymore. If you didn’t feel comfortable enough to put your own money/credit on the line, you should have passed.

I also think that this goes against everything you have been preaching on this blog and I am unsubscribing.

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35 J. Money September 22, 2011 at 4:10 pm

Ouch. Sorry to hear.

My parents actually had the money sitting in a money market making close to nothing, and is there for helping out their kids or anything else that came up. Obviously if they needed it back at any point I could have done so.

True about ventures not being 100% solid. Since I got the $18,000 back and then some though, it’s already a done deal. Everything forward is extra. It was a risk I was willing to take, and my parents happily wanted to help out — if I had lost the money, I would have still paid them back every single last penny as I promised (and wrote in the contract) for them. They wouldn’t lose a thing either way – except for the miniscule % from being out of the money market.

Sorry to hear you feel this goes against everything I preach – I do the best I can to keep this site as real as possible. And I think I’ve done a pretty good job over the 3+ years so far. Not sure how long you’ve been reading for, but I do appreciate it either way :)

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